Biggest IPO Failures in Last 20 Years

Indian ipo share market has had its up and down in the last two decades or so in its evolution. Even as some IPOs have gone as high as the birds do, there are those that have fallen like the birds and investors have been deflated. It’s worth knowing what were those ever-green disastrous ipo share market that made an entry into the Indian stock market post-millennium. Such fables are best illustrated as the warning signs regarding the potential of IPO investing besides providing the readers with the understanding of the prospect sharing the latest hype in the market.

  1. Reliance Power IPO (2008) 

The Reliance Power IPO is one of the most publicized and awaited IPOs in the Indian context of share market history. It was floated in 2008 and was that year’s biggest very IPO, having attracted a sum of Rs 11,563 crore. The issue was many times over subscribed by as much as 73 times, bear testimony to the strong interest investors have in investing in anything that is associated with the Reliance brand. 

However, this was just the start of the parties’ ride, and the euphoria was short-lived. On the stock exchange, it was noted that Reliance Power shares opened in green with the company having issued at a price premium but it was soon trading below the issue price. One year down the line, the returns on the stock were worth over eighty percent less.

  1. Cafe Coffee Day (2015) 

Cafe Coffee Day which is the largest coffee chain in India listed itself in 2015 with a lot of expectations. The stocks floated by the company through the IPO exercise had “over subscription” of one. The Privilege List in 2002 has been invoked 81 times raising Rs 1,150 crore. However, it was more listed at a discount to its issue price and the situation remained grim in the next year as well. 

The competition became stiff from international brands such as Starbucks and was laden with high amounts of debts. The company, however, underwent a tragedy where its founder V G Siddhartha went missing and was later found dead with a suicide note stating issues of mounting debts and pressure from the lenders in the year 2019. It was eventually listed that trading is to cease until the company stabilises, the price of the stock has dramatically dropping. The Cafe Coffee Day episode sums up the need to look at a company’s balance sheet and its standing before buying an IPO. 

  1. Indiabulls Power (2009)

The Indiabulls Power Ltd. IPO that was undertaken in the calendar year 2009 is another IPO that completely failed to entice investor interest. The company aims at the public floated the issues for Rs 1,530 crore which was many times oversubscribed as 21 times. But the stock when listed was at a discount and it further went down in the subsequent months. 

Some of the problems that the company had to deal with were the slippages in project timeline, regulatory problem and unfavourable business environment for power companies in India. Indiabulls Power finally decided to come out of the power business all together and this left investors worse off. 

  1. Suzlon Energy (2005) 

Although Suzlon Energy launched its IPO in the calendar year 2005 which was quite successful, the long-term performance of this Indian wind turbine manufacturer and seller of wind turbines can be even termed as a failure. The wind turbine manufacturer then tapped public traders through its IPO in which it collected Rs 1,496 crore, and the offer was subscribed 46 times over. It was opened at a higher price as a listed stock and returned good earnings for the first few years after it went public. 

However, the end of benefits for Suzlon was much sharper and had a negative connotation. The economic problem together with management issues i. e: poor quality products, high debts, and competition from global companies. Suzlon stock plummeted to a low in year 2020 and this was below one percent from it highs, that meant Investors lost over $5 billion in Suzlon. 

  1. Jet Airways (2005) 

Jet Airways later offered its IPO in 2005 that was well received; it floated Rs 1,899 crore and was subscribed 17 times. It was perceived to be a great candidate for the position within the emerging market of India’s aviation industry. But the company’s experience as a listed entity can be described as quite volatile at the best. 

Operational cost has remained a major albatross on Jet Airways alongside competition and managerial problems. The airline was closed several times to resume operation, but in 2019, it ceased operations throwing out of job thousands of employees and defrauding investors millions of their hard earned money. This can be seen in the Jet Airways’ case that reflects the unpredictable nature of airline business and dangers associated with industries with negligible profit and high lean costs. 

  1. DLF Limited (2007)

DLF’s IPO in 2007 was the largest real estate public offering in India’s history, raising Rs 9,187 crore. The issue was oversubscribed 3.47 times, reflecting investor optimism about the booming real estate sector. However, DLF’s stock market journey has been disappointing for long-term investors.

The company has faced numerous challenges, including a slowdown in the real estate market, high debt levels, and regulatory issues. While DLF remains a major player in the Indian real estate sector, its stock price has struggled to reach its IPO levels, let alone provide substantial returns to investors. 

  1. Future Retail (2016)

Future Retail’s IPO in 2016 was relatively small, raising Rs 181 crore, but its subsequent failure has had far-reaching consequences. The company, which operated popular retail chains like Big Bazaar, initially showed promise in India’s growing organized retail sector.

However, Future Retail faced mounting debts and struggled to compete with the rise of e-commerce giants. The COVID-19 pandemic dealt a severe blow to its offline retail operations, leading to a proposed takeover by Reliance Retail. This deal was contested by Amazon, resulting in a protracted legal battle. As of 2023, Future Retail has entered insolvency proceedings, with its stock price having fallen over 90% from its peak. 

Conclusion

The stories of these IPO failures in the Indian stock market serve as important lessons for investors. While the allure of getting in on the ground floor of the next big thing can be tempting, it’s crucial to approach ipo in stock market with caution and diligence. Thorough research into a company’s financials, business model, competitive landscape, and management is essential before investing. Remember, a successful listing doesn’t guarantee long-term success, and even well-known brands can falter. By learning from these cautionary tales, investors can make more informed decisions and better navigate the complex world of IPO investing in India’s dynamic stock market.

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